"The world has quietly entered a new era, one where there is no national security without global security. We need to recognize this and to restructure and refocus our efforts to respond to this new reality." –Lester R. Brown, Plan B 4.0: Mobilizing to Save Civilization.

Plan B Updates

October 31, 2002

Fuel Cell-Powered Cars Hitting the Road Ahead of Schedule

Bernie Fischlowitz-Roberts

On April 2, 2001, Ballard Power Systems, the world leader in fuel cell production, announced a sale of $16 million of fuel cell modules and support services to the Honda Motor Company. In September and December, 2001, Ballard concluded two agreements with Ford Motor Company to provide $66 million of the same fuel cells and services.

The fuel cell economy is developing much faster than expected, as the competition among companies intensifies. This momentum in developing clean sources of electricity for vehicles, as well as homes and businesses, holds the promise of a cleaner energy future, bringing us one step closer to an eco-economy.

Fuel cells use hydrogen to produce electricity and emit only water and heat. If used to power a vehicle, the fuel cells generate electricity to run the motor. Buildings powered by fuel cells use both the electricity and the heat they generate, increasing the fuel cells' efficiency. If the hydrogen fuel is derived from the electrolysis of water, using electricity obtained from wind turbines, solar cells, hydropower turbines, or geothermal generators, it is completely emission-free. Some fuel cells rely on hydrogen extracted from natural gas or gasoline; while not emission-free, this is still much cleaner than fossil fuel combustion. Fuel cell vehicles that derive hydrogen from fossil fuels are typically twice as fuel-efficient as vehicles with internal combustion engines.

Major automakers are on the verge of introducing fuel cell vehicles (FCVs)-in some cases much sooner than anyone anticipated. DaimlerChrysler announced that early next year, 60 Mercedes-Benz A-Class FCVs will be unveiled as part of limited customer fleets in Japan, Singapore, the United States, and Europe. Honda will sell the first of its FCX model to the city of Los Angeles by the end of 2002, and they plan to distribute 30 cars in California and Japan over the next two to three years. The Honda seats four and has a range of 220 miles (354 kilometers). Toyota also plans to introduce 20 fuel cell hybrid SUVs by the end of the year, which will be offered to customers with access to hydrogen-supply infrastructure and after-sales service. Ford is sending five Focus FCVs to California for evaluation this year, and plans a small number of fleet vehicles in 2004. Even though it may take a decade for widespread commercialization of FCVs, the availability of small fleets of these vehicles ahead of schedule is a promising development.

Fuel cell-powered buses will soon be used in a number of cities. Since buses are often refueled at a central location, just like other fleet vehicles, they can be introduced before hydrogen stations become widely available. Following successful fuel cell bus trials in Chicago and Vancouver during 1999-2001, DaimlerChrysler has been working with Ballard Power Systems, a leading fuel cell producer, to provide 10 European cities with 30 fuel cell buses in the next few years. This European Fuel Cell Bus Project represents the next step in the transition away from internal combustion-powered transportation.

Hydrogen stations are opening to serve the needs of hydrogen vehicles, primarily at research facilities. Honda opened a hydrogen station in Torrance, California, that produces hydrogen using solar-powered water electrolysis. SunLine Transit operates a station in Thousand Palms, California, that offers hydrogen along with numerous other fuels. Munich has a hydrogen station on the grounds of its airport that is used to fuel a fleet of 15 BMW sedans with internal combustion engines that run on hydrogen. Tokyo has three hydrogen stations built with government funding, and a natural gas company in Japan is currently building a fourth.

Iceland plans to be the first hydrogen-powered economy. Next year, DaimlerChrysler will begin to convert Reykjavik's 80 buses to fuel cell engines. Shell is constructing a hydrogen station that uses inexpensive hydropower to electrolyze water to supply the buses. After the buses are converted, Iceland's passenger cars will be next, and then the nation's fishing fleet.

One obstacle to commercialization of fuel cell vehicles is the lack of a fueling infrastructure. In a classic chicken-and-egg situation, car companies are wary of producing too many fuel cell vehicles without a network of hydrogen stations, while companies involved in hydrogen fuel are wary of building the requisite infrastructure in the absence of a sizable fuel cell vehicle market. Some automakers estimate that 30 percent of filling stations in the United States would need to offer hydrogen fuel in order for a viable hydrogen-based transport sector to emerge.

To overcome high costs, which is a second obstacle to mass production and commercialization of FCVs, the stationary fuel cell market may play a key role. Experts at the Rocky Mountain Institute suggest that buildings may be the initial market to increase fuel cell production and cut costs, eventually making fuel cells cost-competitive for vehicles. They make clear, however, that buildings and vehicles are both such large markets that when fuel cell production in either sector starts to take off, the other will follow. Once buildings get much of their power from fuel cells, spare off-peak hydrogen can be used to run vehicles; this eliminates the need for a fully developed network of hydrogen stations to precede FCV commercialization.

Businesses that need a reliable electricity supply are turning to fuel cells to power their buildings. Verizon announced in April 2002 that it would use fuel cells to provide electrical power at a telephone call routing center on Long Island, New York. The U.S. Postal Service's mail processing center in Anchorage, Alaska, also uses fuel cells to get power unaffected by outages on the grid. The First National Bank of Omaha, a credit card processing company, turned to fuel cells to provide the consistent power supply it requires. It then uses the heat from the fuel cells for space heating.

To encourage private investment in building a hydrogen infrastructure conducive to FCVs, tax credits for hydrogen production and fuel cell production-modeled after the wind production tax credit in the United States-could play a constructive role. Tax credits for fuel cell production could stimulate economies of scale to drive down costs. Additional incentives for so-called early adopters could motivate further investment, as could government purchases of FCV fleets. As the single largest user of energy in the world, the U.S. government can play a significant role in stimulating market demand for fuel cells.

The movement to bring hydrogen fuel cells to the forefront of the global energy market will require collaboration across industries. One example of such an effort is the California Fuel Cell Partnership. Formed in 1999, this consists of auto manufacturers, energy providers, fuel cell companies, hydrogen suppliers, developers of hydrogen fueling stations, transit companies, government agencies, and the environmental community. Its goal is to increase public awareness of fuel cells and prepare the market for commercialization of FCV technology.

The European Commission recently launched a high-level group of car and energy companies to ensure that European companies with interests in hydrogen and fuel cell development do not fall behind their Japanese and U.S. counterparts. The group, which includes Royal Dutch/Shell, DaimlerChrysler, and Renault along with 15 other companies, clearly recognizes the competitive advantage of early entrance into the fast-emerging hydrogen economy.